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Moody's: Bank of the Philippine Islands' planned rights issue is credit positive

Bank of the Philippine Islands' plan to conduct a stock rights offering to raise up to 50 billion pesos is credit positive for the lender, Moody's said.

The rating agency said March 22 that the rights issue would add about 380 basis points to the bank's common equity Tier 1 ratio, which clocked in at 11.8% as of December 2017. The additional capital would bring the lender's CET1 ratio above the regulatory minimum of 10% after considering the buffer for domestic systemically important banks.

On March 16, Bank of the Philippine Islands received approval from the Philippine Stock Exchange to offer up to 600 million common stock to eligible shareholders. The lender said it will utilize the new capital to finance loan growth in its growth segments, such as consumer, small and midsize enterprises and microfinance, as well as finance investments in digitalization and branch expansion.

Moody's expects the capital raising to be enough to aid the bank's credit growth of approximately 20% until 2020, after which its CET1 ratio will drop to 12% to 13% as the growth of risk-weighted assets outpaces the growth of retained earnings. The decline may result in the lender needing to raise new capital as its internal capital generation capacity lags behind its credit growth.

The price of the offering, which is expected to be completed by early May, is yet to be determined.

As of March 21, US$1 was equivalent to 52.18 Philippine pesos.